World’s costliest office market shows first signs of weakness, as Hong Kong withdraws biggest commercial site this year, developer cuts rent at Kai Tak tower by 20 per cent
- All three tenders received for commercial site in Tung Chung rejected, Lands Department says
- Rents at grade A tower, expected to be completed in 2022, will start from HK$40 per square foot a month
In the first signs of a slowdown in Hong Kong’s office property market, the government withdrew this year’s largest commercial site from tender, while Nan Fung Development lowered the asking rent for a grade A office tower under construction at Kai Tak by up to 20 per cent.
Bids for the site in Tung Chung, close to Hong Kong International Airport, were received from Sun Hung Kai Properties, CK Asset Holdings and a joint venture of Sino Land and Kerry Properties. About 90 per cent of the project’s floor space was earmarked for office development, according to the government’s land sale document.
“All three tenders received for the sale of a commercial site in Tung Chung have been rejected, as their tendered premiums did not meet the government’s reserve price for the site,” the Lands Department said in a statement on Wednesday.
According to CBRE, 7.8 million sq ft of office space – greater than the size of four Central Plazas – sat vacant in Hong Kong in September, the highest since 1999. An additional 950,000 sq ft, just about the size of the HSBC building, in surrendered spaces – returned by tenants before leases expire – are also available in the market.
The market valuation of the Tung Chung site ranges from HK$3.15 billion (US$406.4 million) to HK$5.68 billion, or between HK$2,500 and HK$4,500 (US$323 and US$581) per square foot, based on a gross floor area of 1.26 million sq ft.
